The Central Bank of Nigeria, CBN, has rolled out a new foreign exchange window to stem the tide of demand pressures which had battered the Naira in the unofficial foreign exchange market. But the new measures, which increased supply of foreign exchange resources to the market, came on stream, yesterday, just as the fortunes of Naira nose-dived further in the parallel market, closing N520/ USD1.
This was also coming against the backdrop of a surge being recorded in foreign reserves. Nigeria’s foreign reserves climbed more than one year high to cross over $29 billion with strong indication of hitting $30 billion before end of first quarter 2017, barring any negative development in the external sector. But currency dealers have continued to witness excess demand which broke the N500/$1 mark two weeks ago and has since pressured upwards, with dealers yesterday speculating that the trend would continue through this week. Transactions at the CBN’s new forex window meant to meet the needs of Nigerians for personal and business travel, medical needs, and school fees, are to be settled at a rate not exceeding 20 percent above the interbank market rate.
In a statement, titled ‘New Policy Actions in the Foreign Exchange Market, signed by its Acting Director of Corporate Communications, Mr Isaac Okoroafor, the apex bank said all banks would receive amounts commensurate with their demand per week, which would be sold to customers who meet usual basic documentary requirements. The apex bank stated: “The CBN would meet the needs of parents, guardians and sponsors who are seeking to make payments of school and educational fees for their children and wards. Such payments must be made by commercial banks directly to the institution specified by the customer.
“This would also apply to customers seeking to make payments, or purchase foreign exchange, for medical bills and paid directly to hospitals. The supply of FX to retail end-users (PTA, BTA, school fees, medical bills, etc) would be sustained by the CBN.” Forex policy overhaul. The apex bank also announced some major changes in its existing policy on foreign exchange trading. According to its statement, “in order to further increase the availability of foreign exchange to all end-users, the CBN has decided to significantly reduce the tenor of its forward sales from the current maximum cycle of 180 days, to no more than 60 days from the date of transaction.
The CBN also directed all banks to open foreign exchange retail outlets at major airports as soon as logistics permit. This directive, it stated, was in order to further ease the burden of travellers and ensure that transactions are settled at much more competitive exchange rates, Moreover, to maintain confidence in the forex market, the CBN announced it would immediately begin implementing its articulated program to clear all the unfilled orders in the interbank forex market, adding that, “given our plan to meet all unfilled orders, and while provision of forex to the manufacturing sector would remain the CBN’s strong priority, we will no longer impose allocation/utilization rules on commercial banks.”
The apex bank further said it would implement an effective intervention programme to support the inter-bank market to ensure adequate liquidity necessary to deliver an efficient forex market, and therefore advised FMDQ to activate its FX Order-Book systems as soon as possible and also accelerate the on-boarding of FX clients on the FX Relationship Systems to ensure total transparency of the FX market. Given its objective to pursue a transparent, liquid, and efficient forex market, the CBN warned that it would neither tolerate unscrupulous actions nor hesitate to bring serious sanctions on offenders, be they banks or their staff.